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December 22, 2008 8:12 am

Falling UK commercial property prices

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UK commercial property prices have already fallen by 25 per cent since last summer, but there is now clear evidence is that the UK property market has entered its so-called “double dip” phase as falling rents from struggling office and retail occupiers began to accentuate already dropping prices in the cyclical market downturn over the past year.

The IPD property index shows that the fall in property total returns accelerated in the third quarter of 2008 over the previous quarter, to -3.8 per cent, the worst month so far this downturn, with capital values down 4.3 per cent. While income returns rose 0.5 per cent, rental value growth fell -0.3 per cent, the sixth month of decline.

Some of the more bearish observers such as the Royal Institution of Chartered Surveyors predict the market could fall more than 50 per cent peak-to-trough, potentially worse than the previous downturns in the early 1990s and 1970s. The picture varies considerably on a regional basis, as shown by this data, with some parts of the country still relatively insulated while others suffer worse as local businesses struggle to survive. The knock-on effect, inevitably, will be falling rental values, lower investment prices and rising vacancies, which will mean difficulties for the property companies and investors active in these areas.

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